Despite its huge potential, China’s automotive market has many problems, the biggest of which is trust, according to Chen Min, founder and CEO of Tuhu.cn.

　　Chen made the comments while speaking at CBU/CAR’s Monthly Automotive Salon (MAS) held on March 22 in Shanghai, which had a theme of Aftermarket under the New Regulatory Environment. Joining him is Andorfer Andreas, president of Bosch Automotive Aftermarket Greater China.

　　“Many companies have spent many efforts to solve this problem, but in the last 10 years, it has not been solved,” said Chen, whose company was founded five years ago as a B2C e-commerce platform that mainly sells tires, engine oil and accessories.

　　Some of the major issues confronting the market, according to Chen, include counterfeit parts, high servicing fees and non-transparent pricing. Customers often pay different prices for repair and maintenance at different shops depending on their sex, income level or the type of car they own. There are many layers of logistics vendors which lead to inefficiency of parts logistics. China’s aftermarket is also fragmented, with about 1 million repair stores for the roughly 170 million vehicles on the road, compared with just around 300,000 repair shops for 250 million vehicles in the U.S.

　　“There are many stores that do not have enough technical capabilities to repair cars and many technicians and workers in those stores do not have enough knowledge, skillset or training to repair cars,” said Chen. “Vehicle owners do not trust the stores, the logistics, the channel and the products sold by these stores.”

　　Tuhu.cn’s solution to this problem, according to Chen, is a business model whereby customers order parts such as tires online through its website or mobile app, which are then delivered to partner workshops where installation is completed and Tuhu.cn pays for the service. Chen believes this business model ensures trust from customers because it is Tuhu.cn, rather than the shops, that sell products to the customers. The shops act as service vendors for Tuhu.cn and if customers have any problems, they go to Tuhu.cn for help.

　　Currently Tuhu.cn has about 10,000 offline partner stores in about 330 cities covering every Province. It has also established 20 warehouses to be doubled to 40 in 40 cities which will cover roughly about 50 percentof the car population in China, according to Chen, who believes having its own warehouses and logistics/supply chain ensures operational efficiency. It also purchases directly from suppliers such as Bosch, 3M, Goodyear, Continental and Bridgestone. In fact it is the biggest retailer for the three tire brands. Tuhu.cn also utilizes leading open e-commerce platforms such as JD.com and Alibaba’s tmall.com besides its own website and Wechat platform.

　　There are roughly 6 million registered users on Tuhu.cn, 200,000 of which are active daily. Daily maintenance order is about 2,000 and growing by about 20 percent per month. Chen expects revenues this year to triple to ¥3 billion from ¥1 billion in 2015. In Shanghai, according to Chen, for every 10 tires sold in the city, two are through Tuhu.cn

　　Chen forecasts that China’s automobile parc will reach 300 million units by 2020 from the current 170 million units, exceeding that of the U.S. By then, China will also become the largest automotive aftermarket worldwide. Chen estimates that based on an average of ¥6,000 spent per vehicle on maintenance and repair services on tires, oil, filters and brakes, the value of China’s aftermarket is already over ¥1 trillion.

　　Tuhu.cn has focused on the B2C model in China, according to Chen, because Chinese car owners often don’t know much about their cars in terms of when and what to repair. “China’s automotive aftermarket is a DIFM (do it for me) market, not a DIY (do it yourself) market,” said Chen. “Ninety percent of the customers do not know the difference in engine oil labeling, and they don’t know when they need to change the windshield wiper.” The fact that the average age of car ownership is only 4 years in China also means that Chinese car owners tend to focus more on tires, maintenance service and beauty, rather than repair, according to Chen.

　　But he emphasized the importance of offline store partners, saying that the internet platform is just a tool to help improve efficiency. “The aftermarket is still an industry that heavily relies on offline capabilities,” said Chen. “Our job is to make logistics more efficient and offer customers lower standard prices for parts and service.”